COMMENTS BY FUJI PHOTO FILM CONCERNING GOVERNMENT OF JAPAN WTO SUBMISSION IN THE FILM CASE

In its WTO submission today, the Government of Japan has established beyond all doubt that the United States, on behalf of Kodak, has failed in its attempt to press a case that is groundless. Despite U.S. misstatements, omissions, and misunderstandings, the basic requirements for proving a claim in the WTO are clear, as described below. Japan's submission absolutely establishes that the U.S. failed to meet those requirements.

USTR abandoned virtually all substantive claims that Japan violated the actual rules of the WTO, and relied almost exclusively on claims of "non-violation nullification and impairment." The U.S. admits that actions by Japan did not violate the WTO, but claims that they "nullified or impaired" previously granted tariff benefits.

To win its case, the U.S. had to prove that the Japanese government took certain actions that impaired or nullified tariff concessions on color film negotiated in the Tokyo Round in 1979 and in the Uruguay Round in 1994, and even older tariff concessions on black and white film from the Kennedy Round in 1967. The U.S. failed both to show that it could not have reasonably anticipated these Japanese Government policies at the time of the tariff concessions, and that the situation now is any worse than at the time of the tariff concessions. Both defects are fatal to the U.S. claims.

The actions were the so-called "distribution countermeasures," which the U.S. argues resulted in a shift to single-brand film distribution that makes it harder for imported film to "get on the shelf;" the Premiums Law; and the Large Scale Retail Store Law. Japan has demonstrated that there is simply no connection between those actions and the development of the Japanese film and paper market, as summarized below.

"Distribution Countermeasures:" The U.S. cites as evidence of Japanese government involvement in changing competitive conditions in the film market various MITI "distribution guidelines" recommending that Japanese companies take steps to modernize and streamline distribution practices. But the facts demonstrate no connection between the alleged government actions and that feature of the distribution system--single-brand distribution--that the U.S. claims is the reason tariff benefits were nullified or impaired. More important, single-brand distribution at the primary wholesaler level was already the well established method of distribution in Japan at least four years before the first tariff concessions on color film and paper.

By the 1960s, Japanese film manufacturers and importers, including Kodak, had adopted single-brand distribution and acquired or contracted with existing wholesalers to build single-brand distribution networks. This process was largely completed by 1967 and the universal norm by 1979, and did not change through 1994, when the tariff concessions were negotiated, respectively. Given this very public process and the fact that single-brand distribution is the norm in virtually every film market worldwide, the U.S. simply could not have anticipated anything other than single-brand distribution in Japan.

For color film, the heart of the U.S. case, the U.S. cannot now say that in 1979 or 1994 it did not anticipate government measures (which the U.S. itself claims began in 1970), and the resulting single-brand distribution (which was an accomplished fact by 1975). For black and white film, now a mere two percent of the market, it is equally impossible for the U.S. to claim that single-brand distribution could not have been reasonably anticipated in 1967.

Premiums Law: Japan shows that application of the Premiums Law is substantially more liberal today than it was in 1967, 1979 or 1994. Japan documents the fact that manufacturers, distributors, and retailers have more freedom today to offer premiums than they did when tariff concessions were negotiated, so there was no restriction after 1979 or 1994 that the U.S. could have been unable to anticipate. Japan establishes that the Premiums Law does not restrict the practices that the U.S. complains Kodak has been unable to use--cross promotions and multipaks, and they are common to all film companies in Japan today, including Kodak. There are no restrictions on aggressive advertising, and Kodak has recently doubled its market share in Nagano by promoting its Winter Olympics sponsorship. This U.S. claim is also groundless.

Large Scale Retail Store Law: Japan demonstrates two key facts about the Large Scale Retail Store Law. First, the Large Scale Retail Store Law does not address any products, much less film, so it could not give any advantage to domestic brand film over foreign brands. Second the administration of the Large Scale Retail Store Law has been substantially liberalized since the Tokyo Round and the Uruguay Round negotiations were concluded in 1979 and 1994. The Japanese submission makes it clear that the Large Scale Retail Store Law itself replaced a more restrictive earlier law that applied in 1967, that it is easier today to obtain approval, and that restrictions are fewer than the U.S. could have reasonably anticipated at those times. Moreover, Japan establishes beyond doubt that there is no correlation between the existence of large scale retail stores and sales of imported film.

The key question posed by this case is whether the conditions of competition in the Japanese film and paper markets were upset after 1967, 1979 or 1994. The U.S. has failed to demonstrate that they were. Japan has shown that they were not. Even assuming that the U.S. claims that actions by the Government of Japan were actually "measures" under WTO rules, the market situation is better now than at any time in the past.

Japan has also revealed that beyond being unable to show any government measures that upset the market, the U.S. actually supported the very measures it is now claiming created competitive problems. The U.S. complains about the 1970 MITI distribution guidelines. But Japan's submission shows that the U.S. praised MITI's 1990 guidelines, which contained many of the same recommendations made in 1970. The United States is thus on record as labeling the same actions as trade barriers and as welcome market opening initiatives. The United States cannot have it both ways--despite its efforts to do so.

Fujifilm is extremely gratified by the decisive and overwhelming case that the Government of Japan has presented. Fujifilm repeats our long-held position, which has now been amply documented by the Government of Japan--USTR should never have accepted this case from Kodak. The Government of Japan has fully vindicated Fujifilm's confidence that in a neutral and objective forum, U.S. claims on Kodak's behalf will be totally and decisively refuted.